Pushing on a String: Why Tax Breaks for the Rich Won’t Help

Pushing on a string: Why tax breaks for the rich won’t help

The future of America’s middle class is at stake as the battle over
the Bush tax cuts heats up in Washington. Despite the fact that a strong
majority of Americans support ending the Bush tax cuts for the
wealthiest, some in Congress are still hesitant. It’s at times like
these that we should take a long, hard look at what got us into this
economic mess.

On the eve of the Great Recession in 2007, income inequalities in
America were at their highest levels since just before the Great
Depression. 50 percent of all income went to the top 10 percent in 1928,
leaving the bottom 90 percent to vie over the other half. That dropped
to just over 30 percent during the Great Prosperity from 1942 to 1979,
leaving nearly 70 percent of income for the remaining 90 percent of
households, though overt racism barred many from sharing in that
prosperity. The purchasing power of that broad and strong middle class
became fuel for the roaring engine of our nation’s economy.

Then
in 1980 our nation began to grow apart again – a divergence kicked off
by financial deregulation and tax cuts for the wealthy. The growing
divide was made worse by the assault on organized labor and the
weakening of social safety nets. By 2007, income inequalities had
reverted to pre-Depression levels. Mark Twain once said, “History
doesn’t repeat itself, but it does rhyme.” And so it does.

With
so much money in so few hands, high stakes speculation and wild bubble
rides on Wall Street destabilized our economy. When the house of cards
came down, it fell right on top of middle-class Americans. Communities
were ravaged – with the stripping away of jobs, homes and savings –
while the Wall Street gamblers sat comfortably in their velvety casino
chairs lighting another cigar.

So far the economic recovery has
been very one-sided. For low- and middle-income Americans, unemployment
continues to be painfully high and millions of homes are in foreclosure.
On the other hand, the Dow Jones has largely recovered since it
bottomed out in early 2009, while the Wall Street crowd and Big Business
execs are once again rolling in extravagant bonuses. For the wealthy,
the recession’s storm has passed.

Despite this one-sided
recovery, Congressional Republicans are telling us the problem with our
economy is that rich people don’t have enough money. They want to make
the Bush tax cuts for the wealthiest Americans permanent, adding $700
billion to our national debt over the next 10 years, paid for with more
borrowed money. Ironically, these are the same people screaming about
deficits. Of course, they claim that this is about creating jobs, but
those tax breaks are more likely to sit in a bank or be invested
overseas.

More importantly, pouring even more money into the
pockets of the wealthy simply won’t get our economy moving again,
especially in a recession as deep as this. Such a top down,
“supply-side” strategy for economic growth is like pushing on a string.
It’s futile and a wasteful use of borrowed money. It simply won’t work
without a strong middle class to pull on the other end of that string,
with the purchasing power to buy the goods and services produced.

It’s
time to rebuild our economic engine by putting middle-class families
first. Instead of expensive and wasteful tax breaks for the very rich,
we should be focused on strengthening our middle class. Obama is right
to target tax cuts to those earning less than $250,000. Even better,
let’s use public dollars to create jobs directly for middle-class
households while making long-term investments in our communities, such
as building light rail for our cities and bullet trains in major
corridors, installing green energy retrofits to public buildings, and
putting more teachers in our schools.

Funny thing about pulling
on a string. It moves even if there’s no one pushing on the other end.
That’s the beauty of demand-side economic growth strategies. With a
long-term focus on revitalizing our nation’s middle class with
good-paying jobs, we can sow the seeds of another – more inclusive –
Great Prosperity.